Robert T. Fraley, the executive vice president and chief technology officer of Monsanto, penned an opinion item in today’s Wall Street Journal, where he noted that, “Genetically modified crops, which have generated both controversy and widespread adoption, are hitting 20-year milestones. Perhaps the anniversary slipped your mind, but 1997 was a dark one for the European corn worm. That was the year Bt corn, the first to bear its own protection against the larvae of the rapacious corn worm, was commercially introduced.
“The European corn worm had long ago invaded the U.S. and by the mid-1990s was causing more than $1 billion in annual damage. But now no insecticide was needed, thank you, because Bt corn had been genetically modified to pack its own. It produced a protein toxic to the corn worm and some of its fellow travelers, while benign to most other insects.”
Mr. Fraley indicated that, “What have been the effects of this technology? In May a committee convened by the National Academies of Sciences, Engineering, and Medicine completed a two-year review, ‘Genetically Engineered Crops: Experiences and Prospects.’ The committee, which examined about 900 studies, painted a highly positive picture.
“The academies’ report found ‘no differences that would implicate a higher risk to human health from eating GE foods than from eating their non-GE counterparts.’ It also ‘found little evidence to connect GE crops and their associated technologies with adverse agronomic or environmental problems.’ In some cases, the review said, ‘planting Bt crops has tended to result in higher insect biodiversity,’ by reducing pesticide use.
“The report supported genetic modification in a fundamental way: It called for ‘strategic public investment in emerging genetic-engineering technologies and other approaches to address food security and other challenges.'”
Today’s opinion item also pointed out that, “These conclusions could not have surprised anyone who follows the issue. They’re consistent with the findings of the American Association for the Advancement of Science, the American Medical Association, the World Health Organization and other highly respected groups. Thousands of independent researchers have consistently found that GMOs benefit not only farmers and the public, but also biodiversity, soil quality, water quality, carbon sequestration—in short, the environment.”
After citing studies that pointed to GMOs’ positive impact on crop yields, farmer profitability, and cost reductions, Mr. Fraley stated that, “To keep current production without the gains from GMO crops, more than 97,000 additional square miles—an area larger than Ohio and Indiana combined—would have to be cultivated globally. Instead the carbon in all that land, which would be released to the air during tilling, stayed in the dirt.”
Mr. Fraley conlcluded by noting that: “The rapidly growing global population and warming climate will make agricultural innovations a necessity, not a luxury. In my view, the next two decades will bring even more innovations than the past two.”
Meanwhile, a recent news release from Purdue University indicated that, “Purdue University professor of animal sciences William Muir recognizes the potentially immense benefits of genetic modification technology, commonly known as genetic engineering or gene editing.
“‘It could cure or prevent cancer, increase food production to feed a rapidly expanding global population, alleviate pain and suffering among livestock animals and prevent the spread of mosquito-borne diseases such as Zika or malaria,’ says Muir, a biotechnology specialist.”
The release added that, “‘While it’s important to keep in mind all of the wonderful things we can do, we need to be cognizant of what the risks are and make sure we have the appropriate safeguards in place,’ [Muir] says. ‘This is a tremendously powerful technology, and it is absolutely vital that we make sure it is used responsibly.'”
Kelsey Gee reported on the front page of the Money & Investing section of today’s Wall Street Journal that, “Cattle and hog prices hover near the lowest levels in years as U.S. meatpackers produce the largest volume of meat in history.
“Last week’s 9.2% slide in hog futures on the Chicago Mercantile Exchange was a dramatic turnaround for what was the best-performing commodity market in the first half of this year thanks to strong pork exports to China.”
Ms. Gee noted that, “The buildup has stoked concerns over a glut of meat, poultry and other agricultural products in the U.S. Producers are on track to send a record number of hogs and chickens to slaughter this year, and beef production is rapidly increasing.
“Dairy farmers are spoiling excess milk in their fields as warehouses pile up excess cheese. Also, corn, soybean and wheat growers are preparing for a fourth consecutive year of bumper harvests this fall.
“The U.S. Agriculture Department on Friday pegged the size of the nation’s hog and pig herd on Sept. 1 at 70.851 million head, the largest on record for that time of year. That compared with 69.946 million hogs predicted by a Wall Street Journal survey of analysts.”
USDA-NASS, Quarterly Hogs and Pigs
Today’s Journal article added that, “The figure illustrates how producers responded to lofty prices and profitable margins at the start of the summer by breeding more animals—before a sharp drop in prices to multiyear lows reversed the economics for many farmers.
“The U.S. hog herd is still growing, even as the profit potential for many producers evaporates and export demand begins to cool.”
Also, Boomberg writers Lydia Mulvany and Jen Skerritt reported earlier this week that, “Ham, bacon, ribs, pork loins — if it has to do with pigs, prices are in the doldrums.
“Hog futures were the worst investment in commodities last quarter and in the past year. That’s because there are simply too many pigs. They’re so numerous these days that slaughterhouses will have to add shifts and operate on Saturdays in November and December to process them all into food, according to Will Sawyer, an Atlanta-based vice president for Rabobank International.”
The Bloomberg article added that, “The huge supplies are coming at a time of tepid export demand. China, which more than doubled U.S. pork purchases in the first half of the year, has now put the brakes on buying. Devaluation of the peso also threatens shipments to Mexico, the destination for 40 percent of U.S. hams. Wholesale prices for pork cuts such as ham and ribs are the lowest for this time of year since 2009. Hedge funds are signaling the meat will probably stay cheap, as speculators cut their bets on a hogs rally in four of the past five weeks.”
Meanwhile, Christopher Doering reported recently at The Des Moines Register Online that, “Costs for beef and veal are expected to drop 5 percent, as the industry grapples with too much supply and reduced demand. Pork prices are expected to drop 2.5 percent in 2016.”
Mr. Doering also pointed out that, “But things have changed. Now [Dave Hommel, who raises swine in Grundy County, Iowa, is] receiving 35 cents a pound for his hogs, compared with around $1 per pound two years ago.
“‘There is a fair amount of pain in the livestock industry here in the Midwest,’ [Hommel] said. ‘Our plan is to hunker down. I don’t know how much longer this will last.'”
In part, the FAPRI report stated that, “Net farm income is expected to decline for the third straight year in 2016 and is likely to remain well below recent peaks for the next several years.”
More specifically, the report noted that, “Sharply lower cattle and egg prices contribute to a $23 billion reduction in projected livestock sector receipts in 2016. Crop receipts also decline slightly, as lower prices for corn, wheat and other crops offset the impact of increased production.
“Projected net farm income declines by $10 billion in 2016, as the drop in receipts outweighs reductions in production costs.”
Other highlights of yesterday’s FAPRI update included:
“August USDA reports indicated cropland rental rates and average farm real estate values declined in 2016 after years of sharp increases. Additional declines are projected for 2017‐2019 in response to sharp reductions in crop returns relative to recent peak levels.
“With reduced asset values, the projected ratio of farm debts to assets increases from 12 percent in 2015 to 14 percent in 2019.
“Government farm program outlays peak in fiscal year 2018, when many payments associated with the 2016/17 marketing year are made.”
Table from yesterday’s FAPRI update
Meanwhile, a news release last week from University of Missouri Extension stated that, “The latest USDA cash rental survey shows decreasing rental rates in some areas of Missouri, says University of Missouri Extension agricultural business specialist Joe Koenen.
“USDA’s National Agricultural Statistics Service (NASS) released its annual survey Sept. 9. View data on Missouri counties at bit.ly/2dfym0d.
“‘Some of the better crop counties in central and north Missouri showed a decrease in rental rates, reflecting lower crop prices,’ Koenen says. Other counties remain unchanged, and pasture rates held stable or showed slight increases.”
The news release added that, “Low prices and high corn yields will put pressure on rental rates, [Koenen] says. Soybean prices dropped, but not as much as corn prices. A decrease in soybean prices also will likely affect rent prices. ‘How much is still to be determined.’
“Koenen says it is important for landowners and renters to know yields on cropland. Yields and land quality affect what the renter pays.”
In his Email newsletter on Friday, House Ag Committee ranking member Collin Peterson (D., Minn.) highlighted issues associated with the Conservation Reserve Program and the Farm Bill.
Specfically, Rep. Peterson stated that: “This week I had a chance to sit down with Pheasants Forever’s Dave Nomsen to talk about the future of the Conservation Reserve Program, known as CRP, in the next farm bill. I remain concerned that we are losing too many of the large tracts that provide excellent habitat for wildlife. Although the budget restraints in the farm bill remain a challenge when it comes to making significant changes to the program, there are a number of things we can do to make this program more farmer friendly — like increasing the flexibility around the haying and grazing rules. I look forward to working with Pheasants Forever and other conservation and agriculture organizations as we take a careful look at how this program is working and what changes we would like to see in the next farm bill.”
Reuters writer Mark Weinraub reported on Friday that, “U.S. wheat supplies ballooned to the biggest in nearly 30 years during the summer months, topping expectations, as a 12 percent jump in production and weak demand on the export market filled storage bins, the government said on Friday.
“The U.S. Agriculture Department also reported corn and soybean stocks as of Sept. 1 at multi-year highs despite record usage of both commodities during the June, July and August time period.”
The article noted that, “Corn stocks were 1.738 billion bushels, the biggest since 2006, and soybean stocks were at a five-year high of 197 million bushels. Analysts were expecting corn stocks of 1.754 billion bushels and soybean stocks of 201 million bushels.”
Also on Friday, in its Small Grains annual summary, USDA indicated that, “All wheat production totaled 2.31 billion bushels in 2016, up 12 percent from the revised 2015 total of 2.06 billion bushels. Area harvested for grain totaled 43.9 million acres, down 7 percent from the previous year. The United States yield is estimated at 52.6 bushels per acre, up 9 bushels from the previous year and represents a new record high. The levels of production and changes from 2015 by type are winter wheat, 1.67 billion bushels, up 22 percent; other spring wheat, 534 million bushels, down 11 percent; and Durum wheat, 104 million bushels, up 24 percent.”
With respect to prices, USDA noted in its monthly Agricultural Prices report late last week that, “The August price for all wheat, at $3.67 per bushel, is down 8 cents from July and $1.17 below August 2015.”
The Ag Prices report added that, “The corn price, at $3.21 per bushel, is down 39 cents from last month and down 47 cents from August 2015.”
And regarding soybean prices, USDA stated that, “The soybean price, at $9.93 per bushel, decreased 27 cents from July but is 22 cents above August a year earlier.
And from the livestock sector, USDA indicated on Friday in its Quarterly Hogs and Pigs report that, “United States inventory of all hogs and pigs on September 1, 2016 was 70.9 million head. This was up 2 percent from September 1, 2015, and up 4 percent from June 1, 2016.”
DTN Executive Editor Marcia Zarley Taylor reported yesterday that, “Farmers know they must weather the lean years to benefit from the occasional fat ones. But erosion in federal crop revenue insurance guarantees since 2013 is compounding the risks for farm operators during this downturn.
“‘In times like this, we aren’t worried about making money. Our goal is to make darn sure we don’t lose too much,’ said Mark Bryant, who raises wheat, corn and soybeans with brother Mike and other family members in Washington Courthouse, Ohio.
“Bryant’s problem is the crop insurance floor keeps falling with commodity prices, exposing his farm to ever bigger losses. Ohio winter wheat producers, who face a 2017 crop insurance sale closing date of Sept. 30, will be guaranteed only $4.74 per bushel next year, down 45% from the same coverage four years ago.”
Ms. Taylor noted that, “Winter wheat isn’t alone. Back in 2013, a typical non-irrigated Kansas corn grower could guarantee about $678 per acre (thanks to a $5.65 base price and 120 bpa historic yield with 80% coverage.) By 2016, that protection had dipped 32% — to a base price of $3.86 and $463 per acre coverage, observed Kansas State University economist Allen Featherstone.
“Sadly, production costs haven’t retreated nearly as far or as fast as prices, leaving farmers to self-insure those revenue gaps.”
The DTN update added that, “Based on futures prices in late September, Featherstone expects that same 80% corn coverage to shrink to only $448 per acre coverage with a $3.73 guarantee in his Kansas example. That’s an additional $230-per-acre operator risk compared to four years earlier.
“Soybeans also have suffered from a similar safety net shrinkage, although they stand to get a small bump upward come spring. Featherstone projects 2017 spring insurance prices at $9.31 for soybeans, down from $12.87 per bushel in 2013 but up from $8.85 per bushel in 2016.”
DTN Graph Courtesy of KSU
Ms. Taylor also pointed out that, “Bryant is exploring private insurance products that will help him boost the floor on coverage. University economists also continue to recommend options like Yield Exclusion (YE), Yield Adjustment (YA) and Trend Adjustment (TA), which may significantly boost a grower’s Actual Production History (APH) and ultimately, their revenue per acre.”
A news release on Tuesday from House Ag Committee member Rick Crawford (R., Ark.) stated that, “Today [Rep. Crawford] introduced H.R. 6167, the Farm Risk Abatement and Mitigation Election (FRAME) Act, to give farmers the option of taking disaster preparedness into their own hands. The FRAME Act would establish tax-deferred farm savings accounts that farmers could then withdraw from during difficult times without waiting on disaster declarations and government assistance.
“In a conversation with the chairman of the Arkansas Bankers Association, Sean Williams, Congressman Crawford discussed the details of the legislation and how it would work in practice, including its impact on rural communities and banks. The video [is available below], and the audio here.”
The news release added that, “Like IRA’s and Health Savings Accounts, Crawford’s proposed FRAME Accounts would allow contributions, capital gains and dividends to be tax-deferred. Farmers would then be able to draw from the FRAME account whenever they needed it to cope with a disaster, independent of government or state designation, which can often be slow in coming.
“To encourage initial investment, farmers will be eligible to write-off FRAME Account contributions on their tax bill. Contributions will be tax deductible up to $50,000 per year, and farmers will retain 10% of their contributions in the form of a tax credit during the first few years after opening the account.”
And Brownfield’s Tom Steever reported yesterday that, “The accounts, said Crawford, are intended for emergency money in lieu of ad hoc disaster payments which he says are harder to come by.
“‘We’re looking at this as a way essentially for farmers to get a little bit of the tax benefit for implementing a risk management strategy that they can utilize at their own discretion, obviously with those safeguards that we talked about before,’ he said, ‘but it puts the taxpayer at no exposure.’
“The Farm Risk Abatement & Mitigation Election – FRAME – Act provides for penalties when the account is used for non-farm related expenditures such as vacations, according to Crawford. Contributions to the accounts, capital gains and dividends, he said, are to be tax-deferred.”
Mr. Steever and Rep. Crawford also discussed the legislation in more detail, an audio replay of their conversation is available here.
Nathan Kauffman indicated in a column posted yesterday at the Federal Reserve Bank of Kansas City Online (“U.S. Farm Economy Slumps into the Fourth Quarter“) that, “In August, expectations for 2016 farm income were revised up modestly from the February forecast, but income was still expected to decline notably from a year ago. The U.S. Department of Agriculture’s August revision can be interpreted as both positive and negative for the farm sector. On the positive side, farm income expectations for 2015 and 2016 were revised up by 43 percent and 31 percent, respectively (Chart 1). On the negative side, however, the expected decline in farm income from 2015 to 2016 widened from 3 percent earlier in the year to 11 percent in the most recent report. Essentially, farm income was higher than initially forecasted, but the deterioration from a year ago is now believed to be sharper than expected.”
Dr. Kauffman stated that, “The improvement in farm income expectations was largely due to downward revisionsin production costs for the farm sector as revenue expectations continued to weaken.”
The Fed report added that, “Although U.S. farm income expectations were revised up in August, profit margins for many producers of major U.S. agricultural commodities weakened significantly in the third quarter. In the crop sector, the range of average monthly prices throughout 2016 has left very few opportunities for producers to sell at a profit (Charts 4a, 4b, 4c, 4d). Since 2013, profit margins have dropped precipitously for corn, soybeans, wheat, and cotton, and both wheat and corn prices were hovering at or near 10-year lows in September.”
Yesterday’s report also pointed out that, “The downturn in the agricultural economy has continued to affect credit conditions in the sector. From 2010 to 2014, borrowers had few problems repaying loans. Since 2014, though, bankers in the Tenth Federal Reserve District have consistently reported an increase in the severity of loan repayment problems (Chart 6). As of the second quarter of this year, Tenth District bankers indicated that more than 7 percent of their agricultural loans were experiencing either ‘major’ or ‘severe’ repayment problems, an increase from just 4 percent in 2015.”
And yesterday’s report also noted that, “Bankers in the Kansas City Fed District also continued to point to spillover effects from the softening farm economy to Main Street business activity.”
From the front page of Wednesday’s Des Moines Register
Donnelle Eller reported on the front page of today’s Des Moines Register that, “Dan Zumbach lost 50 acres of corn when the Cedar River flooded. Yet he considers himself lucky.
“Most of his 160 acres would have been lost if not for family, friends and neighbors who gathered Saturday with combines, grain carts and semitrailer trucks to harvest a field near Palo. They worked from noon until 11 p.m. before the rising waters forced them to quit.”
The Register article stated that, “Iowa’s widespread thunderstorms and torrential rains have done more than flood Iowa’s cities and towns. They have also slowed much of the state’s corn and soybean harvest.
“Officials are trying to assess how many acres have been impacted by flooding, but it’s likely to be thousands, they say.
“Many farmers hope to begin combining in the next couple days, but it could take some growers as long as two weeks before they’re able to harvest soybeans and corn, said state Agriculture Secretary Bill Northey, who farms near Spirit Lake, an area that also was inundated with rain last week.”
Greg Jaffe and Juliet Eilperin reported on the front page of today’s Washington Post that, “Late last year, Agriculture Secretary Tom Vilsack strode into the Oval Office to tell President Obama that he wanted to resign.
“‘Mr. President,’ he said, ‘I think it’s time to go.’
“Vilsack had survived nearly eight years in Washington as Obama’s model Cabinet secretary — a disciplined and efficient technocrat who understood the inner workings of his department, worked well with lawmakers and did not cause trouble for the White House.”
The Post writers stated that, “Lately, though, that approach did not seem to be enough to fix the problems he was seeing in the country. Vilsack was frustrated with a culture in Washington that too often ignored rural America’s struggles and dismissed its virtues. ‘I just sometimes think rural America is a forgotten place,’ he often said.”
“Vilsack sometimes felt forgotten, too. He ran a sprawling bureaucracy with 93,000 employees and a $150 billion budget, but the number of consequential issues crossing his desk had dwindled. ‘There are days when I have literally nothing to do,’ he recalled thinking as he weighed his decision to quit.
“The Oval Office conversation would change the trajectory of Vilsack’s career and affect him personally in ways that he could not have predicted. Obama asked him to oversee the administration’s response to the opioid crisis that was ravaging rural America.”
Today’s article noted that, “The new assignment would force Vilsack to confront not only the immediate drug crisis in the country but also the frustrations and feelings of economic hopelessness that had taken root and allowed the epidemic to flourish.
“Each morning Vilsack’s staff passed him statistics that tracked the administration’s top priorities: its push to train physicians on the risks of opioid addiction; the latest on its effort to get the overdose reversal drug naloxone out to more communities; the status of federal grants earmarked for struggling communities.”
The Post article added that, “[Sec. Vilsack] knew that he did not have money for anything ambitious. An urgent request from the White House earlier this year for $1.1 billion to battle the opioid epidemic was stalled in Congress. His department’s discretionary budget, which he could use to fund clinics, was $2 billion less than it had been in 2010.
“So Vilsack channeled his energy into little things: A police officer he had met complained that prices of naloxone, the overdose-reversal drug, had tripled since January to nearly $160 per dose, making it too costly for many rural police and fire departments. Vilsack promised to raise the issue with the White House.”
“But, he was most excited about a four-state pilot program he was developing to use USDA grants and foreclosed properties to create transitional housing for people in treatment,” the article said.
Jaffe and Eilperin pointed out that, “Vilsack knew that the past 15 years had hit rural America especially hard. Rural child poverty rates had begun climbing in 2003, peaking at levels last seen in the 1960s. Only in the past few years had they begun to edge back down. Rural Americans were older, more likely to be obese, less likely to go to college and more likely to become pregnant in their teenage years than people in the rest of the country. And now the opioid crisis.”
The Post article stated that, “[Sec. Vilsack’s] frustration was with the rest of the country — the media, Congress and the private sector — which he felt had ignored the struggles and contributions of a region that produced most of the country’s food and, during 15 years of war, had disproportionately filled the ranks of its military.”
And today’s article also indicated that, “Privately, [Sec. Vilsack] let his anger and frustration with Washington show. He was sensitive to the smallest slights directed at rural America or his record. Denis McDonough, the president’s chief of staff, praised Vilsack’s effectiveness even as he referred to him as the ‘cranky’ Cabinet secretary.
“‘Maybe I have been here too long,’ Vilsack grumbled. He gazed up at his sprawling Beaux-Arts style office with its gold filigree columns, massive windows and stunning views of the Mall.
“‘I have to be cranky,’ he continued, ‘because people don’t pay attention to this part of the country.'”
The U.S. Trade Representative said the move this week by Chinese officials to drop the ban was a ‘critical first step‘ to restoring market access for U.S. producers.
“The USTR and U.S. Department of Agriculture ‘look forward to China’s final audit report on beef, and subsequent discussions between the United States and China on the specific conditions that will allow trade to resume,’ the representative said in a statement.”
Ms. Gee added that, “The U.S. and China have sparred over acceptable farming practices, including as recently as this month, when the Obama administration launched a case against China at the World Trade Organization. The U.S. alleges that Beijing is subsidizing grain and rice growers above internationally-agreed levels.
“Chinese and U.S. regulators also disagree on whether or not to permit the use of a handful of different veterinary medicines used in animal agriculture.”
Reuters writer Karl Plume reported yesterday that, “Heavy rains and flooding swamped a broad swathe of the northern Midwest this week, halting the harvest of corn and soybeans and forcing the closure of at least two Iowa crop processing plants, traders and farmers said on Friday.
“Farmers’ concerns grew that standing water in fields could damage unharvested crops, while floodwaters swelled the Mississippi River and threatened to disrupt the loading of export-bound grain barges.
“Parts of northern Iowa and southern Minnesota received several inches of rain at midweek, with two-day rain totals topping 10 inches (25 cm) in some areas, meteorologists said.”
Mr. Plume explained that, “Farmers, meanwhile, are waiting for fields to drain and dry out before resuming the harvest, a process that will take longer in cooler September weather than it would in midsummer heat.
“Soggy conditions and waterlogged fields have raised concerns about crop damage and disease, which could reduce farmer revenues at a time when grain prices are already near multi-year lows.
“‘If (soybeans) are under water for more than a day or two, it will be bad,’ said University of Minnesota extension agronomist Seth Naeve.”
Meanwhile, William Edwards indicated in an update yesterday from Iowa State University Extension,that, “Some Iowa corn and soybean producers are facing substantial if not complete crop losses due to flooding. Fortunately, nearly 90 percent of Iowa’s corn and soybean acres are protected by Multiple Peril Crop Insurance (MPCI).”
Mr. Edwards explained that, “Most Iowa producers purchase crop insurance policies with a 75 to 85 percent level of coverage. This means that if crops are a total loss, the producer must withstand the first 15 to 25 percent of the loss. However, in 2016 nearly 90 percent of the crop acres insured in Iowa were covered under Revenue Protection policies, which offer an increasing guarantee if prices increase between February and October. So far, this has added about $.80 per bushel to soybean guarantees, while the current corn futures price is actually below the February average. Moreover, since Revenue Protection (RP) policies are settled at the average nearby futures price during the month of October, rather than local cash prices, farmers receive a bonus equal to the fall grain basis in their area.
“Producers with crops that have been totally destroyed by flooding will not have to incur the variable costs of harvesting. This could save around $20 per acre for soybeans and perhaps $50 per acre for corn, depending on potential yields and drying costs. Nevertheless, even producers who carried insurance at a high coverage level could be looking at net revenues near or below those obtained from normal yields this year.”
Looking to next year, Mr. Edwards noted that, “In some cases there may be doubt as to whether land flooded this year can even be planted next year. Risk Management Agency rules state that land must be physically available for planting to be insurable. Land that cannot be planted due to weather events that occurred before the sales closing date (March 15 in Iowa) is not eligible for prevented planting payments. When operators report their 2016 production, they can request that their 2016 yield histories reflect a value equal to 60 percent of the county “T-yield” rather than a zero or very low yield.
“Close communication and cooperation between owners, crop insurance agents and renters can be a ‘win-win’ strategy in the long run, but recovery may take several years.”
Wall Street Journal writer Rebecca Blumenstein reported this week that, “China’s premier promised to resume Chinese imports of U.S. beef soon, calling it a sign of Beijing’s sincerity to improve commercial ties with the U.S.
“Speaking to U.S. business groups in New York on Tuesday night, Premier Li Keqiang said China would soon allow imports of U.S. beef.”
The Journal article explained that, “Though the premier didn’t give a specific timetable, trade groups have previously said imports may resume before the end of the year. China has had a ban in place on most U.S. beef imports since 2003, partly due to concerns over the spread of bovine spongiform encephalopathy, or ‘mad cow’ disease, after a cow with the disease was found in Washington state.”
Meanwhile, Kelsey Gee, Lucy Craymer and Rebecca Blumenstein reported today at The Wall Street Journal Online that, “U.S. beef producers on Wednesday reacted cautiously to a pledge by China’s premier to lift a ban on U.S. beef imports that has restricted access to the market for more than a decade.
“Industry officials said the lack of a clear timeline for lifting the de facto import ban in place since 2003 limited the potential upside for an industry reeling from rising supplies and a sharp drop in prices.”
Today’s Journal article also included this helpful perspective: “With U.S. freezers heaving with beef as the domestic herd expands, China offers a potential outlet. The country consumes around 13% of the world’s beef, with Brazil and Australia the top overseas suppliers…[U.]S. beef accounted for 70% of the 11,000 tons imported into China in 2002, and with the growth of the market there were significant opportunities for producers, said Angus Gidley-Baird, an analyst at Rabobank.”
“For U.S. hog producers, access to Chinese buyers has been a double-edged sword, as U.S. prices have risen and fallen in line with adjustments in demand from the world’s largest pork market,” the Journal writers said.
In a news release today, Rep. Kevin Cramer (R., N.D.) stated that, “This is great news, both for our cattle producers and consumers worldwide. It presents another opportunity for our livestock producers to help feed a hungry world. China’s 1.4 billion people have a growing appetite for meat consumption, and North Dakota producers have premium product to export. Technical negotiations on lifting this ban are underway, and I will work with the USDA and other agencies to see this large and ever-expanding market opens as soon as practical.”
Recall that earlier this week, The Financial Times reported that, “For the world’s wheat farmers already reeling from decade-low prices due to bumper crops around the world, it is the last thing they wanted.
“Confusion surrounding quarantine rules in Egypt has effectively taken the world’s largest wheat importer out of the international market, depressing prices, which are already weak from plentiful harvests.”
Yesterday, Ed Ballard and Dahlia Kholaif reported at The Wall Street Journal Online that, “Egypt has repealed its ban on imports of grains tainted with ergot, a fungus found in wheat, backing down after a face-off with the international grain trade that was threatening the food security of the import-dependent country.
“The ban had led to the rejection of hundreds of thousands of tons of grain found to contain ergot.”
The Journal writers explained that, “The government said Egypt would abandon its zero-tolerance approach and fall into line with United Nations-backed international standards that tolerate grain containing up to 0.05% ergot. The blight is dangerous in large doses but widely tolerated in trace amounts. Traders said that it is nearly impossible to guarantee a shipment is entirely ergot-free.
“The zero-tolerance policy resulted in 540,000 tons of wheat imports being suspended, according to the government.
“Shipments that had been rejected are now expected to be approved for import, a spokesman for Egypt’s supply ministry said.”
In his prepared testimony, Sec. Vilsack pointed out that, “Even as commodity prices have weakened and farm incomes have decreased, the rural economy remains strong. Our work to increase trade, grow the bioeconomy, strengthen local and regional food systems, and expand conservation have resulted in a more resilient rural economy. Rural and urban areas continue to recover from the Great Recession. Median income for farm households remains near the historic high of 2014 — 35 percent higher than median US household income in 2015.”
In his opening remarks, Chairman Pat Roberts (R., Kans.) pointed out that, “Eleven days ago, I and Chairman Conaway attended the Kansas State Fair, a great opportunity to hear first-hand what folks had on their minds. Plain and simple, farmers and ranchers are worried. The downturn in the agricultural economy is taking a toll on their pocketbooks and the health of many family operations.”
“Most years this would be great news, however these high yields come at a time when we are experiencing large inventories worldwide. At the farm gate, the drop in commodity prices and farm income are felt first hand…and their magnitude is foremost on everyone’s minds around this table.”
Ag Committee Ranking Member, Debbie Stabenow (D., Mich.) indicated in her opening remarks that, “As we know, there has been a dramatic slowdown in the farm economy since the passage of the Farm Bill. Farm income has dropped by over 50 percent—the steepest drop in farm income since the Great Depression. Our farm safety net keeps producers in business when disaster strikes. The 2014 Farm Bill made historic reforms by shifting away from direct payments to a focus on the risk management tools farmers requested to support producers during the bad years like we are seeing today.
“New and beginning farmers are especially vulnerable to financial stress during these times, making access to credit an especially important tool. I applaud USDA for taking action earlier this month to provide additional funding for farm loans. I am hopeful Congress can provide additional flexibility for USDA to extend credit to all farmers in need.”
A news release today from Sen. John Hoeven (R., N.D.) stated that, “Hoeven thanked Vilsack for joining the Office of the United States Trade Representative (USTR) in launching a new trade enforcement challenge against China at the World Trade Organization (WTO). USTR is challenging the country’s excessive subsidies of wheat, rice and corn.” (A portion of the Sec. Vilsack’s remarks on this issue can be heard on the link below).
Sen. Hoeven’s news release added that, “The senator also requested Vilsack’s support for his Capital for Farmers and Ranchers Act, bipartisan legislation Hoeven introduced with Senator Amy Klobuchar (D-Minn.) to increase the maximum loan amount that an individual farmer or rancher is able to receive under FSA’s loan and loan guarantee programs.”
In part, Sen. Perdue noted that, “I’m concerned about regulation. Everywhere that I go, I talk to our farmers. Regulation is the number one topic [of concern], then comes labor.”
Iowa GOP Senator Joni Ernst (R-Iowa) also highlighted regulatory concerns at yesterday’s hearing, noting that, “And what I’m hearing mostly from our Iowans, especially the farmers, the ranchers, and our land owners, is that it really feels like the federal government is out to get them, and I see that a lot with a number of the rules and regulations that are coming forward.”
The full discussion Sen. Ernst had with Sec. Vilack can be viewed below.
A news release yesterday from Sen. John Thune (R., S.D.) stated in part that, “Thune discussed the lack of common-sense guidance and policy for the Conservation Reserve Program (CRP), which is critical to South Dakota agriculture as an economic alternative to farming marginal and fragile lands. Additionally, CRP provides most of the brood-rearing habitat for South Dakota’s pheasant population, which brings in more than $250 million to the state’s economy.”
A replay of Sen. Thune’s discussion from yesterday’s hearing is available below.
Former Committee Chairman Pat Leahy (D., Vt.) highlighted dairy issues at yesterday’s hearing, a portion of his remarks on this issue can be seen below.
DTN writer Todd Neeley reported yesterday that, “What’s more, as debate on the next farm bill will commence next year, the ability to maintain a strong safety net is expected to be front and center.
“‘This administration has proposed cuts to crop insurance programs each and every year,’ Roberts said. ‘We fought hard to stop a $3 billion cut. The crop insurance program is not a bank. In regard to these proposed cuts — not in this room, not on my watch.'”
The DTN article added that, “Demand for farm loans has been increasing, [Sec. Vilsack] he said, ‘driven in part by the need to cover operating expenses as commodity prices have fallen more quickly than costs.
“‘As a result, the debt-to-asset ratio for U.S. producers has increased over the past two years, but in aggregate is still near historic lows,’ Vilsack said.”
And an update yesterday from WHO radio (Des Moines, Iowa) stated in part that, “In fact, Vilsack told lawmakers that in his opinion, a common factor between essentially every hot spot in the world is the fact that none have a functioning agricultural economy, and all of them have a lot of hungry people.
“‘So if we’re serious about protecting our own people, if we’re serious about making sure the world is a safer and better place for our kids and grandkids, then we have to understand the role that agriculture in this country, and agriculture around the world, will play in providing that level of security,’ he said, ‘and I think, frankly, that there is a lack of appreciation, at times, not certainly in this committee, but in other parts of this town, on the significant role that agriculture plays.'”
And Ken Anderson reported yesterday at Brownfield that, “As the USDA works to implement the GMO labeling law, Senate Agriculture Committee chair Pat Roberts cautions the agency to stay within the limits of what Congress intended.
“During a committee hearing Wednesday, Roberts asked Ag Secretary Tom Vilsack about a proposed USDA study on whether consumers will actually use electronic or digital devices when making food purchasing decisions. Roberts said that question goes beyond the scope of the GMO labeling law.”
The Brownfield update added that, “Vilsack disagreed with Roberts’ assessment. He said the study will provide valuable information as USDA develops the framework for GMO labeling.”
Reuters writer Diane Bartz reported today that, “U.S. lawmakers expressed concern on Tuesday over a wave of mergers among companies that sell farmers their seeds, herbicides and insecticides, worrying that the deals could lead to higher prices and less innovation at a time of dropping farm incomes.
“Senator Richard Blumenthal, a Democrat from Connecticut, said the proposed mergers of Dow and DuPont, Bayer and Monsanto and Syngenta and ChemChina had potential consequences which were ‘troubling, in fact alarming.’
Ms. Bartz noted that, “The merger spree began in December, when chemical titans DuPont and Dow Chemical Co agreed to an all-stock merger valued at $130 billion at the time, a first step toward breaking up into three separate businesses.
“Next was ChemChina’s $43 billion takeover of Swiss pesticides and seeds group Syngenta in February. That deal won approval from a U.S. national security panel in August.
Christopher Doering reported in today’s Des Moines Register (photo, right) that, “[Sen. Chuck Grassley (R., Iowa), chairman of the Senate Judiciary Committee], who farms corn and soybeans with his son in Butler County, expressed concern that the pending mergers will have ‘an enhanced adverse impact on competition in the industry,’ raise barriers to entry for smaller companies, reduce choice and boost the price of chemicals and seed for farmers.
“‘It’s absolutely crucial that competition is preserved in this important sector of our economy. And in Iowa, my constituents — including farmers, company employees and regular consumers — are interested in hearing how these mergers will impact price, choice and jobs,’ he said.”
The Register article noted that, “Bob Young, chief economist with the American Farm Bureau Federation, said the reasons for the mergers make sense. It is expensive and time-consuming to develop and obtain approval for a new product, and the expertise of one company can complement that of another. For example, Monsanto has proposed merging its focus on seeds and traits with Bayer’s market-leading position in the crop chemical business. With the slumping farm economy, consolidation was expected, Young said.”
Jacob Bunge reported yesterday at The Wall Street Journal Online that, “U.S. senators on Tuesday challenged executives from the world’s largest seed companies to justify a wave of mergers, which some lawmakers said could lead to higher prices for farmers and consumers alike.”
Mr. Bunge explained that, “Senior officials from Monsanto Co., Bayer AG, DuPont Co. and Dow Chemical Co. said their combinations would yield higher-performing crops and more effective chemical sprays by integrating research and sharing regulatory costs. If successful, the mergers would shrink the seed and pesticide industry’s top six global players to four companies.
“The tie-ups were catalyzed by a deep slump in the U.S. farm economy, which was hurt by four consecutive bumper crops that sent commodity crop prices plunging. The deal-making boom could reorder the $100 billion global market in seeds, pesticides and plant genes that enable crops to survive herbicides and repel bugs. Net farm income in the U.S. is projected to drop 11.5% this year, a third straight annual decline, and some farmers are skeptical their bottom lines will benefit from the cost savings and improved products envisioned by merging seed makers.”
The Journal article added that, “Sen. Amy Klobuchar (D., Minn.) warned that fusing companies with different specialties—such as Bayer’s focus on pesticides and Monsanto’s deep portfolio of seed genetics and biotechnology capabilities—could leave few avenues for upstarts to penetrate the research-intensive business. ‘It poses a question of whether some mergers are too big to fix,’ she said.”
Yesterday’s article also noted that, “‘This is an industry that desperately needs to invest more,’ said Robert Fraley, Monsanto’s chief technology officer, who estimated that Monsanto spends about $1.5 billion annually developing new products. Asked what would happen if the mergers weren’t permitted to advance, Mr. Fraley said it was unlikely Monsanto and its rivals would be able to release new products as swiftly.
“The executives played down concerns about reduced competition by pointing to longstanding agreements to license biotech crop genes to competitors.”
DTN writer Emily Unglesbee reported yesterday that, “Sen. Ted Cruz, R-Texas, introduced a newly minted study from Texas A&M’s Agricultural and Food Policy Center showing that the Monsanto-Bayer and Dow-DuPont mergers would increase corn, soybean and cotton seed prices, with cotton prices rising by as much as 20%. In contrast, another study submitted by National Corn Growers Association CEO Chris Novak showed that the Dow-DuPont merger was unlikely to hurt competition for herbicides, insecticides or soybean seed, and that the resulting increased consolidation in the corn seed market would not be harmful.”
And AP writer Mary Clare Jalonick noted yesterday that, “Farm groups testified that they are worried about the consequences.
“Roger Johnson, head of the National Farmers Union, said that the mergers would mean that three companies would have more than 80 percent of U.S. corn seed sales and 70 percent of the global pesticide market.”